Volume 33, Number 7 · April 24, 1986
The New Chance for the Economy
By Felix G. Rohatyn
Any discussion of the economy today has to begin with the most favorable economic event of the last twenty years, the collapse in oil prices. The runaway increase in oil prices in the 1970s was an enormous tax imposed on the industrial world by the oil producers. It created the inflation and the economic crisis that caused political turmoil in the West, and laid the groundwork for the third-world debt crisis with which we are still struggling. The current collapse of oil prices has just the opposite effect. It is the equivalent of having a multi-billion-dollar tax cut without increasing our deficit. It keeps inflation rates down, thus allowing interest rates to come down, along with the dollar, despite large domestic deficits and borrowing requirements.
Feature, 4744 words
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